The House of Commons Standing Committee on Finance’s report on the pre-budget consultations was released December 10, and includes a number of recommendations directly responsive to CIAC’s requests. Of note is Recommendation 9 (page 40) to, “Work with all other levels of government to align and coordinate efforts to create a competitive investment climate across Canada to attract world-class value-added petrochemical facilities.”

Isabelle Des Chênes, Executive Vice-President of the Chemistry Industry Association of Canada (CIAC), testified before the House of Commons Standing Committee on Finance’s pre-budget consultation hearings in Edmonton Wednesday, October 17.

In her address, she stated that urgent action was needed to ensure that Canada can compete with other jurisdictions for the next wave of chemistry industry investment.

“You might have read the eye-catching headlines last month saying that left un-checked, tax reforms south of the border would put 635,000 Canadian jobs at risk and potentially reduce Canada’s GDP by $85 billion – or nearly five per cent of the economy,” she told the committee.

“The Pricewaterhouse Coopers report commissioned by the Business Council of Canada specified that the petrochemical sector will be particularly hard hit by these reforms which pose a ‘serious risk’ to chemistry manufacturing in Canada. These are issues that have been on CIAC’s radar for quite some time and others are finally starting to notice.”

Action items included adopting a temporary 100 per cent Accelerated Capital Cost Allowance (ACCA) for the chemistry industry; investing in programs to allow Canada to become a leader in the commercialization of technologies to recycle, recover or transform all plastics by 2040; and renewing the National Trade Corridor Initiative including investments in rail and ports and re-funding the Rail Safety Improvement Program and expanding it to include education and resources around the transportation of dangerous goods.

Last year’s U.S. tax reform poses a substantial risk to the long-term viability of a large portion of Canada’s petrochemical and other chemical industry, as well as the Canadian economy at large, according to a PricewaterhouseCoopers report commissioned by the Business Council of Canada and released on September 12.

The impacts of U.S. tax reform on Canada’s economy, looks at numerous sectors in the Canadian economy. Key findings indicate that the U.S. tax reforms would put 635,000 jobs (3.4 per cent of Canada’s employment) at risk and potentially reduce Canada’s GDP by $85 billion (4.9 per cent of the economy).

The petrochemical sector will be particularly hard hit. The report indicates that with the U.S. tax reform, Canada is falling even further behind the U.S. in terms of competitiveness posing a “serious risk” to petrochemical manufacturing in Canada.

“The relative attractiveness of the U.S. is reflected in the fact that, capital expenditure in chemical manufacturing has decreased by 0.3 per cent in Canada over the past five years, while increasing by 10 per cent in the U.S.,” The report states.

These findings echo the concerns raised in CIAC’s 2019 Federal Pre-Budget Submission. The submission notes that although Canada used to enjoy an advantage through its marginal effective tax rate to help overcome construction, utility, labour and logistics disadvantages, that advantage is now gone with the U.S. tax overhaul. CIAC is calling on the government to take urgent action to ensure the Canadian chemistry sector remains competitive to keep business – and jobs – within Canada.

After a tough few years following the global downturn in oil prices, numerous economic indicators now predict that Alberta is set to have one of the fastest growing provincial economies in Canada in 2018.

At CIAC, we are very pleased with the recent measures the provincial government has taken to help push Alberta’s economic recovery along. Their commitment to investing in the chemistry sector serves as a model for the rest of Canada and the rest of the provinces should pay close attention.

Last February, Alberta’s Energy Diversification Advisory Committee (EDAC) released a report recommending new investments in resource value-added chemical manufacturing to help put Alberta on the map for investors. The goals were to increase the value of energy resources, create jobs and attract new investment to Alberta through economic diversification and responsible development.

Days after these recommendations were made, the provincial government quickly moved to table Bill 1, The Energy Diversification Act, launching the second round of the Petrochemicals Diversification Program (PDP) and establishing a Feedstock Infrastructure Initiative.

Shortly after on March 22, the province reiterated its strong commitment to the chemistry sector in its 2018 budget.

The $500-million investment by round two of the PDP and the $500 million Petrochemicals Feedstock Infrastructure Program investment will ensure that Alberta’s resources are manufactured into high-value products before being sold to global markets.

These recent efforts to diversify the energy economy have already resulted in nearly $10 billion in completed, initiated and proposed chemistry projects in Alberta. These new initiatives should lead to a further $10 billion or more in new investments.

The chemistry sector is already a key contributor to Alberta’s energy value-add strategy in which natural gas liquids, such as ethane, and natural gas itself (methane) are converted into high-value chemicals and fertilizers. This strategy has resulted in $16 billion in sales and $8 billion in exports in 2016. We know that the industry also creates high-value jobs with multiplier effects – each job in the chemistry industry results in another five in related sectors and services.

Internationally, by adding value to Canada’s low-carbon energy resources, the chemistry sector helps Canada take a leadership position in meeting global climate challenges. But to do this, we need to enable our chemistry industry to remain competitive to thrive. No where else in Canada are we seeing direct investment supporting the chemistry industry as we are in Alberta.

Alberta’s support will help the chemistry sector to take advantage of our low-carbon feedstock and create wealth and opportunity for Albertans in a socially and environmentally responsible manner. The rest of Canada should stand up and take notice.

“How can we reconcile our ambitions to grow Canada's chemistry sector at a time when the nation has made a commitment to reduce its greenhouse gas emissions by 30 per cent below 2005 levels by 2030?”

That is the key question Bob Masterson, President and CEO of the Chemistry Industry Association of Canada (CIAC) chose to answer in an upbeat presentation to the Alberta Industrial Heartland Stakeholder Conference in Edmonton on January 25.

He emphasized that determining chemistry's vital role in Canada's low carbon energy future goes to the very heart of determining the future of the chemistry industry in Canada.

Masterson noted that Canada's advantage includes the type of feedstock utilized – natural gas, for example, as opposed to other jurisdictions that make the same chemicals using coal as a feedstock – meaning that right from the beginning our chemistry industry is cleaner, more efficient and less carbon emitting. In fact, Masterson pointed out recent recommendations for lowering GHG emissions of chemistry producers in Europe look a lot like what Canada already has in place.

“What I want you to understand clearly and be able to communicate to others is that Canada is uniquely advantaged to respond to the growing global demand for innovative, low carbon products, while at the same time addressing the climate change challenge both in our own sector, as well as in others.”

Masterson concluded by noting that to grow and sustain Canada's low carbon chemistry sector, what is ultimately needed are more supportive policies that promote investment and growth in the sector.

“When it comes to climate change, the world truly needs more, not less, good chemistry, and more not less, made-in-Canada chemistry.”

The Chemistry Industry Association of Canada (CIAC) was invited to participate in an Alberta government pre-budget consultation on Wednesday, January 17, 2018, hosted by Joe Ceci, President of the Treasury Board and Minister of Finance, and Marg McCauig-Boyd, Minister of Energy.

This session was part of a broader consultation effort and included representatives from oil and gas (upstream, pipelines, and service companies), electricity producers, labour, and the chemical manufacturing sector.

Minister Ceci provided context to this year’s budget challenges highlighting the historic dependence on resource revenue to fund government spending. While there are signs of growth in the province’s economy, tax revenue to government is lagging due to lower commodity prices and the corresponding impact on royalties and corporate income taxes. The Minister indicated a shift in the coming provincial budget to one of government spending restraint, reduced expenditures while maintaining a focus on core programming, and starting on a path to get back to balance between government spending and revenue.

CIAC focussed its comments on two issues of importance to the chemistry sector in Alberta. First, in addition to reducing government expenditures, the government needs to focus on growing new incremental investment in the value-add chemical manufacturing sector. We have missed the current wave of new investment from our sector in the U.S., and through its response to the pending recommendations from the Energy Diversification Advisory Committee (EDAC), we would like to see a longer-term plan for improving the competitiveness of new investments in Alberta.

We need to shift from a singular focus on maximizing resource revenue (market access) to one that includes maximizing the impact of Alberta’s oil and gas resources through increased chemical manufacturing in the province. We compete with other jurisdictions for new investment and all levels of government in Canada – municipal, provincial, and federal – need to work together to improve investment competitiveness in Alberta.

Second, Alberta needs to work with the federal government to understand the impacts of U.S. corporate tax changes relative to maintaining the competitiveness and historical advantage in the combined federal and provincial corporate income taxes. More specifically, we drew attention to the U.S. tax measure for a 100 per cent Accelerated Capital Cost Allowance (ACCA) for five years. The U.S. approach to ACCA is better and broader than what is currently in place in Canada and Alberta. We reinforced our earlier advocacy to Alberta Treasury Board and Finance to work with the federal government to introduce a 100 per cent ACCA for a minimum of one full business cycle of seven years to specifically apply to upgrading resources into manufactured products.

Overall, the Ministers heard from a broad cross-section of Alberta’s energy industry and a dominant theme of discussion focused on improving business competitiveness in the province through both fiscal and non-fiscal measures.

On January 17, 2018, CIAC President and CEO Bob Masterson addressed Ontario’s Standing Committee on Finance and Economic Affairs. The committee was in Ottawa on their province-wide pre-2018 budget consultation tour.

Masterson’s key message was that only robust economic growth, driven by new investment, would provide the economic opportunities and prosperity Ontarians want and desire.

He reminded the committee the chemistry industry already plays an important role Ontario’s fiscal equation — a $22 billion industry directly employing 45,000 well-paid employees — but noted that more has to be done to retain and attract new investment dollars from the global chemistry industry. In fact, Masterson noted, the province should be attracting a larger portion of the North American chemistry industry investments.

“We would have expected to see 12 to 15 global scale investments totalling $15 billion or more. Instead, until late last year, the province saw no global scale investments, and only about $1.5 billion or 10% of expectations in capital investment.”

CIAC’s recommendations are focussed squarely on improving Ontario’s fiscal and regulatory policies to make the province the “jurisdiction of choice” for new chemistry industry investments.

As part of the pre-budget consultation process, CIAC recently submitted its recommendations on the 2018 Ontario Budget to the Standing Committee on Finance and Economic Affairs. The chemistry industry is the fastest growing manufacturing sector in North America. There is an urgent need for action that the 2018 budget could address in concert with the federal government to ensure Ontario does not miss out on investment opportunities in the future.

The global chemistry industry is a story of innovation and incredible growth that is well in excess of global GDP growth rates. Bold, timely and co-ordinated action by the Ontario and federal governments is urgently needed for Canada to capture the existing opportunities.

Key recommendations include:

Maintain the chemistry sector as a priority sector within the Province’s economic development strategy, and its eligibility for investment support within the Jobs and Prosperity Fund and other investment attraction initiatives

At minimum maintain the historical advantage in the combined federal/provincial CIT rate for manufacturing and processing to address the impact of upcoming U.S. CIT cuts.

Make the 10-year extension of the Accelerated Capital Cost Allowance (ACCA) permanent for manufacturing and processing and broaden the coverage of eligible capital assets to signal Canada is welcoming new investments in value-add resource upgrading.

Introduce a 100 per cent ACCA for a minimum of one full business cycle of seven years to specifically apply to upgrading resources into manufactured products.

There is an urgent need for action in the 2018 Ontario Budgetto ensure Ontario does not miss out on investment opportunities in the future. Only a competitive business environment and a welcoming public policy environment will attract our fair share of new investment and create the high value, long-term sustainable jobs that the chemistry sector generates.

On September 1, the Chemistry Industry Association of Canada (CIAC) released a new report titledIndustrial Chemical Industry: Performance Snapshot – First Half of 2017. Overall, industrial chemicals had a strong first half. In the second quarter, all metrics were up except for railcar loadings, which was down slightly. Data mostly points to the performance being led by improvements in product pricing.

Key highlights from the report include:

Shipments increased 13 per cent in Q2, the second successive quarter of 13 per cent growth. This performance was driven by very strong growth in petrochemicals and good growth in inorganic chemicals and other organic chemicals. Synthetic resin shipments remained unchanged.

Exports for industrial chemicals rose 5 per cent in the first half. Again, petrochemicals led the way with a big surge compared to 2016. Other organic chemicals and synthetic resins also showed good growth. Inorganic chemical exports fell by 5 per cent repeating the trend that was seen in the Q1 where shipments rose but exports fell.

Industrial chemical GDP rose by 2 per cent in Q2 reversing declines that had occurred over the previous two quarters.

The quarter-over-quarter change in rail car shipments was down slightly (1 per cent) in Q2. Volumes have been fairly constant since 2013 with some seasonal variations.

Operating profits remained strong, at $850 million for the quarter and at $1.7 billion for the first half, up slightly from the same period in 2016.